After the collapse of Silvergate Bank, one of the two major banks providing financial services to crypto platforms, former clients turned to rival Signature, which was seized by U.S. authorities citing serious liquidity problems. Facing a lack of public trust in the banking industry, U.S. authorities decided over the weekend to place Signature Bank in receivership, notifying its leadership hours before the announcement. The bank primarily invests in cryptocurrencies, with more than a quarter of deposits coming from the industry.
The news dealt a blow to many mainstays of the crypto industry, removing the peg to Circle’s USDC and creating uncertainty for Coinbase and Paxos, which had large holdings in Signature Bank.
The bank and its assets are up for sale by U.S. authorities, with the caveat that only potential buyers with existing banking licenses will be able to peek into its finances. This led to RBC and PNC Financial Services ultimately deciding not to buy.
FDIC Denies Any Limits on Cryptocurrency Exposure
At the time, unnamed sources told Reuters that the FDIC had notified potential buyers that they would be required to exit the cryptocurrency industry entirely. However, a spokesperson for the FDIC now denies any such restrictions, implied or otherwise. As a result, Reuters updated its previous article to reflect the FDIC's rebuttal.
Instead, an FDIC spokesperson allegedly referred potential buyers to an earlier statement saying only that handling cryptocurrencies could be risky. “In light of events highlighting the many risks associated with crypto assets and participants in the crypto asset sector, the institutions issued a statement in January 2023 addressing key risks and are now issuing statements related to liquidity risk. Given these Risks are heightened, banking institutions must actively monitor the liquidity risks inherent in such funding sources and establish and maintain effective risk management practices.
Potential buyers of Signature Bank can declare which assets and former clients they want to acquire, according to the spokesman. Nonetheless, they are neither prohibited nor dissuaded from continuing existing business relationships with the crypto industry. The FDIC is currently making a second attempt to sell Signature, following an attempt last Sunday.
